German economy beats expectations as it grows at highest rate in last 5 years

Economy - Himanshu Gill - Jan 13,2017

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german economy beats expectations as it grows at highest rate in last 5 years

Germany’s economy expanded at its fastest pace in the last five years, recording a growth rate of 1.9 percent driven largely by increased private and government spending.

The Europe’s largest economy expanded by 1.9 percent in 2016, according to the preliminary estimates of the Federal Statistics Office. It stated low-interest rates and a record influx of refugees to be the key reasons for expanded household and state spending.

Consumer spending rose by 2 percent in 2016 and public expenditure increased by 4.2 percent, the statistics office announced at a press conference this week in Berlin. Investments were up by 1.7 percent and construction grew at 3.1 percent. Exports increased by 2.5 percent, while imports were 3.4 percent higher than in 2015.

The country also successfully recorded a third year of not requiring any new government borrowing, with a public sector budget surplus of 6.2 billion euros ($6.6 billion). Germany’s GDP had increased by 1.7 percent in 2015 and 1.6 percent in 2014.

The GDP growth rate for 2016 was earlier anticipated at 1.8 percent. It increased about half a percent in the October to December period from the previous three months, when it grew at 0.2 percent. The official figures for the fourth quarter will be released in the next month.

Germany is regarded as the Europe’s growth engine and this year it is the first among the world’s biggest developed economies to provide data for 2016.

According to Bundesbank, the economy has grown at a significantly faster pace at the end of year – a projection based on recent reports of rising employment and improved business sentiment. The country has also gained from the European Central Bank’s monetary stimulus, which is expected to last at least for the end of this year.

With national elections coming up in 2017, the economy report has boosted Chancellor Angela Merkel’s hopes of getting re-elected.